The Indian Medical Device Industry

1 M U M BA I S I L I C O N VA L L E Y BA N G A LO RE S I N G A P O RE M U M BA I B KC NEW DELHI MUNICH N E W YO RK. The Indian Medical Device Industry Regulatory, Legal and Tax Overview March 2018. Copyright 2018 Nishith Desai Associates The Indian Medical Device Industry Regulatory, Legal and Tax Overview March 2018. Nishith Desai Associates 2018. The Indian Medical Device Industry Regulatory, Legal and Tax Overview Contents EXECUTIVE SUMMARY 01. 1. INTRODUCTION 02. 2. INDIA ENTRY STRATEGIES 04. 3. INVESTMENT CLIMATE IN INDIA 05. 4. INDIA'S POST-TRIPS INTELLECTUAL PROPERTY ENVIRONMENT 06.

2 5. LEGAL AND REGULATORY REGIME 07. I. Authorities 07. II. Licenses Required for Import, Sale, Manufacture and Loan of Medical devices Under the Mdr 10. III. Manufacturing a Notified Medical Device in India 11. IV. Importing a Notified Medical Device into India 11. V. Manufacture/Import of an Investigational Medical Device 12. VI. Clinical Investigation 12. VII. Product Standards 13. VIII. Labeling 13. IX. Quality Management System (Qms) 14. X. Penalties 14. XI. Export Import Restrictions 15. XII. Advertising and Sales Promotion 15. XIII. Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 16.

3 XIV. The Competition Act, 2002 16. XV. Patent Protection 16. XVI. Data Exclusivity 18. XVII. Trademarks 18. XVIII. Government Control Over Prices of Medical devices 19. XIX. Medical Device Rules, 2017 - Salient Features 20. 6. TAXATION REGIME 28. I. Direct Taxes 28. II. Indirect Taxes 35. 7. CONCLUSION- TWO STEPS FORWARD,ONE STEP BACKWARD? 37. ANNEXURE A 38. List of Notified Medical devices ANNEXURE B 39. Labeling Requirements for Notified Medical devices to be marketed in India under MDR ANNEXURE C 41. Labeling requirements for Notified Medical devices intended for export ANNEXURE D 42.

4 Parameters for classification of Medical devices and in vitro diagnostic Medical devices Nishith Desai Associates 2018. The Indian Medical Device Industry Regulatory, Legal and Tax Overview Executive Summary The Medical Device Industry in India is presently mark in the last two years. The Indian Government valued at USD Billion and is growing at has also introduced various fiscal measures to Currently, India is counted among the top 20 promote research, development, manufacturing global Medical devices market and is the 4th largest and import of Medical devices . For instance, the Medical devices market in Asia after Japan, China Government has incentivized scientific research and and South Korea2 and is poised to grow to USD 50 development by providing weighted deduction for billion by 2025 as per some Industry the expense incurred on that front.

5 There is minimal or no import duty on certain Medical devices . The Medical Device market is dominated by imported products, which comprise of around 80% of total However, like any other country, there are certain The domestic companies are largely involved challenges in doing business of Medical devices in manufacturing low-end products for local in India that must be borne in mind. The first and and as well as international consumption. Lately, foremost challenge is price control. The Government many multinational companies have established of India controls prices of certain Medical devices by local presence by acquiring established domestic either fixing a price at which they may be sold under companies or starting a new business.

6 A formula or by restricting the ability of the marketer of the Medical Device to increase its price by more The Indian Medical Device market offers a great than a prescribed percentage at any given time. opportunity not only of its size, but also because The second challenge is the presence of multiple of encouraging policies and regulations that the regulators which may make simple tasks, such as Government has introduced to give a fillip to the rectification of erroneous declaration on the label, Medical Device Industry . For instance, the government quite a tumultuous affair. The third challenge has overhauled the regulatory framework for is presence of archaic laws that do not permit Medical Device in 2017 and has brought it at par with manufactures and importers of Medical Device to international norms by introducing the concept of promote their product directly to the customer as risk-based' regulation.

7 The regulatory licenses issued cures for certain prescribed conditions and illnesses. for import, manufacture or sale of Medical devices All these challenges, and many more, are detailed in have been made perpetual in nature to cut down the body of this research paper. on unnecessary and time-consuming paper-work, in a bid to increase ease of doing business in One must also not lose sight of the fact that the India. Foreign direct investment in Medical Device Indian consumer mindset and local business manufacturing sector is permitted without any practices are unique, and must be carefully studied prior approval from the government, allowing while developing a business model.

8 Certain laws, business to quickly scale-up existing operations by such as the foreign exchange regulations and the tax infusing capital or engage in time-sensitive strategic statute must also be assessed in-depth because they acquisitions. The already robust intellectual property affect the ability of the investor to invest and draw rights regime in India has been strengthened further out returns, and determine the degree of profitability. by tweaking of rules for grant of patent and trade Having said that, the Government remains extremely committed and sensitive to the demands of the 1.

9 Industry , and, in fact, has ear-marked Medical Device devices (last accessed: February 27, 2018). Industry as a sun-shine sector. It is hoped that this 2. devices (last accessed: February 27, 2018). research paper will act as a guide to everyone who is 3. interested in doing business of Medical Device in India. devices (last accessed: February 27, 2018). 4. Medical -equipment-imported-doctors-say/a rticleshow/56081617. cms (last accessed: February 27, 2018). 1. Nishith Desai Associates 2018. Provided upon request only 1. Introduction The approximate USD Billion worth Indian started to focus on Tier II and Tier III cities, a market Medical Device sector is Asia's fourth largest market, which is until now untapped in India.

10 As private and presents an exciting business landscape and enterprises expand in lesser explored markets, opportunities for both multi-national and domestic the demand for Medical devices will expand players. Till the early 1990s, the Medical Device sector proportionally. Other reasons for strong growth was significantly dominated by domestic players. prospects of the Industry are: But after India opened up its markets in 1991, tables have turned. The technological advancement and Economic growth leading to higher disposable incomes expertise that the global market leaders offered has proved to be an advantage.